Nick Clegg: extra welfare cuts can only be made if rich pay up too

Nick Clegg is being compared to Denis Healey, pictured here holding up his 'mini-budget' box in October 1977, who famously said he would tax property speculators 'until the pips squeak' Photograph: Mike Stephens/Getty Images

George Osborne warned during a visit to Sunderland that his idea could hamper the economic recovery. Bernard Jenkin, who is rapidly turning into a Tory grandee, dismissed the idea as the politics of envy. Chris Leslie, the shadow treasury minister, said the Lib Dems were "taking the British people for fools" because they voted in favour of cutting the top rate of tax from 50p to 45p.

And now Denis Healey, who is 94 tomorrow and who famously said in 1974 he would "squeeze property speculators until the pips squeak", has been brought into the row. Matthew Sinclair, Chief Executive of the TaxPayers' Alliance, said:

Taxpayers can only hope that Nick Clegg realises proposals for a wealth tax are a dead end before it is too late, as Denis Healey did when he tried the same thing in the 1970s.

As ever in these matters, the BBC's Nick Robinson has offered the most pithy analysis of the Clegg interview. This is what he blogged this morning:

The chancellor signalled in his last Budget that he would be looking to cut the welfare bill by a further £10bn to meet the cuts made necessary by his earlier announcement that austerity would continue for two more years from 2015.

His main challenge may not be George Osborne, though. I'm told that before the last Budget the chancellor was willing to trade a cut in the top rate of income tax to 40p - not 45p as was announced - in return for agreeing to a version of the Lib Dems' Mansion Tax.

It was in the context of a further £10bn cuts in welfare that Clegg made his remarks to me. The deputy prime minister accepts the needs for cuts but says the burden cannot just fall on the poor. This is what he told me:

So far a lot of debate has been somehow been framed as if the only place you need to make savings is welfare. The blunt truth is that we will need to find further savings in welfare. It constitutes close to a third of total government expenditure.

You can't just say there can be no further savings in welfare at all because before you know it you will end up having to take an axe to health and education spending which many people would be very reluctant to do. Welfare reform does have a continuing role. But that has to be done in a way which starts at the top rather than starts at the bottom.

Clegg also pre-empted the criticism from Labour and the Tories this morning. This is what he said of the inevitable Tory charge that he is indulging in the politics of envy:

I do not [suggest] this – and this is one of the reasons why I have never agreed with leftist politics – out of some spiteful sense of revenge. I don't want to do down people's success. I don't want to deprive people of income they have legitimately earned. I have never been interested in the politics of envy. I am a Liberal to my fingertips in that sense. But I am also a Liberal who believes that if you want to get the country through difficult times everybody's got to play their part. And people at the top have got to play a disproportionately large part.

And Clegg also had a ready answer to the Labour charge that he does not care about the less well off because he supported the reduction in the top rate of income tax from 50p to 45p. He told me the Lib Dems are responsible for cutting income tax for millions of the less well off after successfully pushing for the raising of the personal tax allowance:

The best policy to [put money back into people's pockets and to support demand] is to cut income tax for people on low and middle incomes. As any economist will tell you, it is people on low and middle income who tend to spend what money you give them.

That is why this very dramatic increase in the allowance next April – up to £9,205, remember it was £6,400 when we came into government – is really big and very important and is probably the most important tax change we have made, which hasn't yet come into effect, to help support demand.

If money grew on trees, and I could find a way to do it, I would introduce the £10,000 threshold we have talked about tomorrow. It is one of the best ways to support demand so I will continue to argue for that.

Clegg clearly has a knack of infuriating both left and right. If, as he told me, he is seeking to capture what he described to me as "small 'l' liberal voters" on the centre ground that is not a bad piece of turf to occupy.